Debt Relief for Entrepreneurs in Bankruptcy Proceedings, Part 2

1. Establishing a Repayment Plan at the Request of the Bankrupt Entrepreneur
2. Debt Relief Without Establishing a Repayment Plan
3. Conditional Cancellation of the Bankrupt’s Debts
4. Can the Decision on Conditional Cancellation of the Bankrupt’s Debts Be Changed?
5. Consequences of Revoking the Decision
6. Cancellation of the Bankrupt Entrepreneur’s Debts

Establishing a Repayment Plan at the Request of the Bankrupt Entrepreneur

As mentioned in the previous article, within thirty days from the date of the announcement of the decision to close the bankruptcy proceedings, the bankrupt, who is a natural person, may submit a request to establish a repayment plan for creditors and to cancel the remaining part of the debts that were not satisfied in the bankruptcy proceedings.

The bankrupt entrepreneur’s request is heard in a court session, with creditors being notified through an announcement.

Debt Relief Without Establishing a Repayment Plan

The Bankruptcy Law (p.u.) also provides for the possibility of debt relief for an entrepreneur who is a natural person and whose personal situation clearly indicates that they are permanently unable to make any repayments within a repayment plan for creditors. In such a case, the bankrupt should explicitly state in the request that they are asking for this specific resolution. It is important to remember to submit this request within thirty days from the date of the announcement of the decision to close the bankruptcy proceedings.

The legal basis for this request is Article 369, paragraph 1a of the Bankruptcy Law. Similarly to the previously described request, the request for debt cancellation without establishing a repayment plan for creditors is also heard in a court session, with creditors being notified through an announcement.

Conditional Cancellation of the Bankrupt’s Debts

The third type of positive resolution regarding the debt relief of an entrepreneur is the cancellation of the bankrupt’s debts without establishing a repayment plan for creditors, provided that neither the bankrupt nor any creditor files a request to establish a repayment plan within five years from the date the decision on the conditional cancellation of the bankrupt’s debts without establishing a repayment plan for creditors becomes final. If the court determines that the bankrupt’s inability to make any repayments within a repayment plan for creditors has ceased, it may revoke the decision on the conditional cancellation of the bankrupt’s debts without establishing a repayment plan and establish a repayment plan for creditors.

Can the Decision on Conditional Cancellation of the Bankrupt’s Debts Be Changed?

As the name suggests, the decision on conditional cancellation of the bankrupt’s debts means that it can be revoked—in certain cases. Notably, this is possible if, within five years from the date the decision on conditional cancellation of the bankrupt’s debts without establishing a repayment plan for creditors becomes final, an event occurs justifying the revocation or change of the decision:

• A request is filed by a creditor or the bankrupt to revoke the decision on the conditional cancellation of the bankrupt’s debts without establishing a repayment plan for creditors and to establish a repayment plan for creditors.
• The court revokes the decision on the conditional cancellation of the bankrupt’s debts if, during the aforementioned five-year period, the bankrupt fails to submit a report on their financial and income situation, provides false data, undertakes a legal action concerning their assets that could worsen their financial situation without the court’s consent or approval, or conceals their assets or undertakes a legal action to the detriment of creditors, unless the breach of obligations is minor or the revocation of the decision on the conditional cancellation of the bankrupt’s debts without establishing a repayment plan is justified by fairness or humanitarian reasons.

Consequences of Revoking the Decision

If the decision on conditional cancellation of the bankrupt’s debts without establishing a repayment plan for creditors is revoked, the bankrupt’s debts are not canceled. From the perspective of the bankrupt entrepreneur, it is therefore important to avoid any situations that could lead to the revocation of the conditional cancellation of debts.

Cancellation of the Bankrupt Entrepreneur’s Debts

If neither the bankrupt nor any creditor files a request to revoke the decision on the conditional cancellation of the bankrupt’s debts without establishing a repayment plan for creditors and to establish a repayment plan for creditors, the bankrupt’s debts are canceled after five years from the date the decision on the conditional cancellation of the bankrupt’s debts without establishing a repayment plan for creditors becomes final. At the request of the bankrupt or a creditor, the court issues a decision confirming the cancellation of the bankrupt’s debts without establishing a repayment plan for creditors. The court’s decision indicates the date of cancellation of the bankrupt’s debts.

In the next article, the institution of the repayment plan will be discussed.